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  • USD/TRY drops after three advances in a row.
  • The pair now targets the 10-day/21-day SMAs.
  • US Durable Goods Orders, rig count, next on the docket.

The Turkish Lira is reversing some its initial weakness and is now dragging USD/TRY to the 6.07 region, back from daily highs near 6.13.

USD/TRY looks to trade, sentiment, IMF

The lack of relevant headlines from the US-China trade effervescence coupled with renewed weakness surrounding the buck in response to yesterday’s poor prints from the US housing sector and PMIs appear to be lending some support to the EM FX space, and the Lira is not an exception.

On the not-so-shiny side for TRY, the IFM urged Erdogan’s government to define a policy programme aimed to bring in stability to the domestic economy. In this regard, it is worth recalling that Finmin Albayrak announced in past months some growth oriented measures, although there was not (and there is still no) any mention regarding the timing of their implementation”¦ or if they will ever be implemented at all”¦

What to look for around TRY

The selling interest around the Turkish Lira looks somewhat mitigated at the end of the week, motivating the pair to recede from recent tops. As usual, trade effervescence should remain as key driver in the EM FX space, while frictions between the AKP and its main opposition party in the run up to the municipal elections in Istanbul are also emerging as another source for Lira volatility. Further out, potential US sanctions following the purchase of the Russian missile defence system keeps lingering over the country as well as sanctions over Iranian crude oil exports. Adding insult to injury, the independence and credibility of the CBRT should remain under the microscope against the omnipresent conflict between the Erdogan’s administration and bank’s authorities.

USD/TRY key levels

At the moment the pair is losing 0.28% at 6.0785 and a breach of 5.9472 (low May 10) would aim for 5.7094 (low Apr.17) and finally 5.6537 (200-day SMA). On the other hand, the next barrier emerges at 6.1516 (high May 23) seconded by 6.2457 (2019 high May 9) and then 6.8353 (high Aug. 30 2018).